On July 1st, 2014, amendments to an Act respecting the legal publicity of enterprises (the “Act”) 1 came into force, requiring the registration of trusts operating a commercial enterprise. These provisions were initially introduced in Bill 128, An act to enact the Money-Services Business Act and to amend various legislative provisions, which was assented to on December 10th, 2010.
A trust operating a commercial enterprise, as defined by the Enterprise Registrar, is a trust that carries on an organized economic activity in order to make a profit. Such trusts include the following:
- business trusts such as trusts operating in the commercial, financial, industrial or professional sector;
- investment trusts such as mutual funds or royalty trusts in which investors purchase units of participation of an operating company;
- real estate investment trusts.
A trust operating a commercial enterprise is now required to register with the Quebec Enterprise Registrar, in the same manner as a corporation within 60 days of July 1st, 2014 and must also come up with a name that is compliant with the Charter of the French Language2 if its name is not already compliant. However, the Act does provide for an exception for trusts that are administered by a registered registrant. As such, if one of the trustees of a trust is already registered, the trust will not be able to register. Furthermore, trusts other than those operating a commercial enterprise cannot register, even on a voluntary basis.
As such, the following trusts are explicitly excluded from the requirement to register:
- private trusts constituted with the sole purpose of procuring a benefit for specific persons, such as:
- pension trusts;
- buy-sell agreement trusts for partnerships;
- stock purchase trusts;
- security trusts;
- trust security mechanisms;
- stock escrow trusts;
- voting trusts created under an agreement or a testament (such trusts usually represent an investment vehicle or protective trust rather than a commercial activity);
- testamentary trusts;
- social trusts.
Trusts operating a commercial enterprise that were already registered with the Quebec Enterprise Registrar prior to February 14th, 2011 must update their registration in order to comply with the new requirements dealing specifically with trusts. Furthermore, those whose voluntary registrations were cancelled must reregister in the 60-day delay.
The Act also provides for fines for failure to comply with the above- mentioned registration requirements.